On June 1, Michael Company Purchased Equipment at a Cost

question 246

Multiple Choice

On June 1, Michael Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours.
Using straight-line depreciation, calculate depreciation expense for the second year.

• A) $17,500
• B) $30,000
• C) $12,500
• D) $40,000

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Definitions:

Principle of Exceptions

A management principle focusing on identifying and addressing areas that significantly deviate from the norm or expected results, often utilizing reporting and analysis.

Variances

Differences between planned amounts and actual amounts incurred in operations, budgets, or financial projections.

Standard Costs

Preset costs for the manufacturing or production of goods under normal conditions, used for budgeting and measuring performance.

Standard Costs

Predetermined costs for products or services, used as target costs to compare with actual costs for performance analysis and financial planning.